User Fee Abolition and the Demand for Public Health Care

• DOI: http://doi.org/10.1111/saje.12146
• Author: Steven F. Koch
• Date: 01 June 2017
• Published date: 01 June 2017

USER FEE ABOLITION AND THE DEMAND

FOR PUBLIC HEALTH CARE

STEVEN F.KOCH*

Abstract

This research examines the effect of the abolition of user fees in South Africa, a policy imple-

mented in 1994 for uninsured children under the age of six and the elderly uninsured, as well as

pregnant and nursing mothers. The analysis focuses on the implementation of the policy and the

use of curative public healthcare services by children following strict and fuzzy regression discon-

tinuity designs. The estimates point to statistically insignif‌icant average and local average policy

effects, even though the policy appears to have been implemented reasonably effectively, albeit

imperfectly. In other words, the policy did not, on average, affect the use of curative public

healthcare, at least for those children who should have benef‌ited from the policy.

JEL Classif‌ication: I18, I12

Keywords: User fee abolition, regression discontinuity

1. INTRODUCTION

The imposition and abolition of health care user fees has been a feature of public health

care delivery in Africa for a number of decades. Spurred on by the goal of raising addi-

tional funds for health budgets and increasing the eff‌iciency of health care delivery, a

number of countries on the continent imposed user fees for public health services. How-

ever, experience with those fees was not particularly positive.

1

A number of African coun-

tries have, since, reversed tack, abolishing their user fee programs. The literature

examining these policies and changes has spawned a number of reviews, such as that by

Ridde and Morestin (2011) and Lagarde and Palmer (2008).

* Corresponding author: Professor and Head of Economics, Department of Economics, Uni-

versity of Pretoria, Pretoria, Republic of South Africa. Tel: 27-12-420-5285, Fax: 27-86-691-

2749. E-mail: steve.koch@up.ac.za

The author would like to thank Economic Research Southern Africa for their f‌inancial support.

The author would also like to thank Dane Kennedy and the Centre for High Performance

Computing (CHPC: www.chpc.ac.za) for their support. Comments from Jeffrey S. Racine,

Sara Markowitz, Gauthier Tshiswaka-Kashalala, Chitalu Chama-Chiliba, seminar participants

at the University of the Free State and Emory University, participants at the workshop on

Microeconometric Analysis of South African Data, and a number of anonymous reviewers

were instrumental in the improvement of this research. All remaining errors are the sole

responsibility of the author. This research is based on secondary, and publicly available data.

Ethics approval was received from the Faculty of Economic and Management Sciences

Research Ethics Committee.

1

In Kenya, Willis and Leighton (1995) f‌ind user fees associated with a 27% decrease in utilization

at provincial hospitals, a 46% decrease at district hospitals and a 33% decrease at health centres. In

Zambia, Blas and Limbambala (2001) f‌ind outpatient attendance reductions of 35%. Biritwum

(1994) f‌inds a 40% decrease in outpatient attendance in Ghana.

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C2017 Economic Society of South Africa. doi: 10.1111/saje.12146

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South African Journal of Economics Vol. 85:2 June 2017

South African Journal

of Economics

Largely, early studies focused on registrations at the clinic level, typically for one to

four clinics – see McCoy and Khosa (1996), Mwabu and Wang’ombe (1997), Wilkinson

et al. (1997), Wilkinson et al. (2001). Although these studies f‌ind relatively large

increases in registrations associated with user fee abolition, Lagarde and Palmer (2008)

worry that these studies cover too small a sample of clinics to be meaningful to policy-

makers, and that the studies are unlikely to have uncovered policy impacts. In South

Africa, the focus of this analysis, the most extensive sample is contained in Bayat and

Cleaton-Jones (2003), who consider 10 facilities. There are, however, more recent

facility-level studies in other countries that include a broader sample. For example,

Nabyonga et al. (2005) and Burnham et al. (2004) samples include six to ten health dis-

tricts in Uganda, respectively, while Masiye et al. (2008) and Chama-Chiliba and Koch

(2014) include data from most of the 72 districts in Zambia. With the exception of

Chama-Chiliba and Koch (2014), all of the aforementioned studies uncover large user

fee abolition associations, ranging from 17 to 54%; those increases are shown to coincide

with user fee abolition, but are not causal (Lagarde and Palmer, 2008). In addition to

increases in usage, Burnham et al. (2004), Walker and Gilson (2004) and Masiye et al.

(2008) uncover worker disgruntlement associated with the increased workload.

Although the literature suggests large and benef‌icial impacts are to be had, following

the reduction in healthcare access/use charges, Lagarde and Palmer’s (2008) review is

sceptical. Supported by their interrupted time series analysis, conceptually similar to

regression discontinuityn (RD), they argue that the published clinic-level literature,

including that in South Africa, leaves much to be desired. With respect to South Africa,

they are especially concerned by the willingness to imply national conclusions, based on

data from such a small set of clinics or hospitals, and they worry about possible concur-

rent changes that were also likely to have affected the impact.

2

One approach to addressing the causality limitations within the literature is through

randomised controlled trials (RCTs). For example, in the case of bednet provision, there

is strong evidence from Kenya that free distribution increased take-up (Cohen and

Dupas, 2010). Similarly, Miguel and Kremer (2004) f‌ind that the introduction of cost-

sharing for deworming drugs reduced take-up. More generally, Ashraf et al. (2010) pres-

ent convincing evidence that lower prices are more likely to lead to purchases, at least for

chlorine disinfectant, while post-acceptance discounts do not further inf‌luence purchase

decisions. However, large-scale RCTs of public health care user fee abolition have not

been undertaken. One large-scale analysis, McKelvey et al. (2012), suggests that there are

rather limited price effects associated with contraceptive use in Indonesia. Their analysis

is reasonably representative of “complete scale,” because the f‌inancial crisis impacted the

entire country, even if not uniformly. Although one would expect user fee abolition to

increase take-up, the user fee is not the only cost associated with accessing health facili-

ties. Furthermore, as implied by Burnham et al. (2004), Walker and Gilson (2004) and

Masiye et al. (2008) the health system may not be in a position to scale-up in response.

Therefore, the equilibrium impact of user fee abolition could be much smaller than pol-

icy makers expected, or as has been previously reported.

Because there are no RCTs allowing for the isolation of user fee abolition effects,

researchers have either assumed that user fee abolition was an exogenous policy shock

2

For example, Benatar (1997) highlights the construction of almost 100 new primary care clinics

that were opened by the end of 1996.

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C2017 Economic Society of South Africa.